Gold rises to one-week high

GOLD futures have snapped to a one-week high as a slump in global equities markets and the US dollar drew investors in search of a refuge to the precious metal.

The most actively traded contract, for June delivery, on Thursday rose $US24.40, or 1.8 per cent, to settle at $US1,391.80 a troy ounce on the Comex division of the New York Mercantile Exchange.

Asian stock markets tumbled, with Japan's Nikkei index recording the biggest loss in two years, after data showed China's manufacturing sector shrank this month. The rout spread to European markets, though US shares didn't fall as much.

"The stock market is starting to deal with how they handle things if the training wheels are taken off," said Adam Klopfenstein, a senior market strategist with Archer Financial Services, referring to support from Chinese economic growth and the Federal Reserve's stimulus program.

"People are feeling uncomfortable and looking at metals as a hedge."

Gold prices rose steadily in overnight trading, mirroring gains in other assets seen as a refuge from economic turmoil, including German government bonds, the Swiss franc and Japanese yen.

The dollar retreated on Thursday, adding fuel to gold's gains.

Dollar-denominated gold and the US currency tend to move in opposite directions, as a weaker greenback makes the futures cheaper for holders of other currencies.

Gold had slumped late Wednesday after Federal Reserve chairman Ben Bernanke told Congress that the central bank may slow the pace of its bond buying in the next few months if economic conditions warrant such a move.

The Fed's stimulus efforts, including its current easy-money program, have been a key support for gold prices in recent years. Some investors buy gold as a hedge against the inflation that can follow such policies.

Much of gold's 17 per cent decline in 2013 came as investors bet that a recovering US economy would spur the Fed to pull the plug on its easing measures sooner than had been anticipated.

Still, Bernanke "didn't tell us anything that we didn't already know," said Chuck Butler, president of EverBank World Markets.

Gold futures on Thursday settled higher than they was before Bernanke's testimony was released on Wednesday morning.

Gold trimmed its earlier gains on Thursday after a slightly better-than-expected reading on the US labour market. The Labour Department said initial jobless claims, a proxy for layoffs, stood at 340,000 last week, better than the expected reading of 345,000.

More robust hiring could add pressure to the Fed to throttle back its bond buying, economists say.